Real Estate Terms\/Glossary

Adjustable-rate mortgage (ARM): A mortgage with an interest rate that can fluctuate over time. ARMs typically have a lower initial interest rate than fixed-rate mortgages, but the interest rate can increase over time, which could lead to higher monthly payments.

Appraisal gap: The difference between the appraised value of a home and the purchase price. If the appraisal gap is too large, the lender may not approve the loan, or they may require the borrower to make a larger down payment.

Bridge loan: A short-term loan that can be used to finance the purchase of a new home before the borrower has sold their current home.

Contingency clause: A clause in a purchase contract that gives the buyer the right to back out of the deal without penalty if certain conditions are not met. For example, a buyer may have a contingency clause that allows them to back out of the deal if the home inspection reveals major problems or if the buyer is unable to obtain financing.

Conventional loan: A mortgage that is not backed by a government agency, such as the Federal Housing Administration (FHA) or the Veterans Administration (VA). Conventional loans typically require a down payment of at least 20% and a good credit score.

Credit report: A summary of your credit history, including your credit accounts, payment history, and debt levels. Lenders use your credit report to determine your creditworthiness and whether to approve you for a loan.

Down payment assistance: Programs that can help borrowers make a down payment on a home. There are a variety of down payment assistance programs available, including government programs, state programs, and nonprofit programs.

Earnest money deposit: A deposit that the buyer makes to the seller to show that they are serious about buying the home. The earnest money deposit is typically held in escrow until the closing date.

Foreclosure: The process by which a lender takes possession of a home when the borrower defaults on their mortgage.

Government-backed loan: A mortgage that is insured by a government agency, such as the FHA or VA. Government-backed loans typically allow borrowers to make a down payment of less than 20% and have more flexible credit requirements than conventional loans.

Home equity line of credit (HELOC): A line of credit that is secured by the equity in your home. HELOCs can be used for a variety of purposes, such as home improvements, debt consolidation, or education expenses.

Housing market: The market for buying and selling homes. The housing market is affected by a variety of factors, including economic conditions, interest rates, and supply and demand.

Mortgage insurance premium (MIP): Private mortgage insurance (PMI) is required for borrowers who put down less than 20% on their home purchase. MIP protects the lender in case the borrower defaults on their loan.

Mortgage payment: The monthly payment that the borrower makes to the lender to repay their mortgage. The mortgage payment includes both principal and interest.

Prepaid expenses: Expenses that the buyer pays in advance at closing, such as property taxes and homeowners insurance.

Principal balance: The amount of money that the borrower still owes on their mortgage.

Property taxes: Taxes that are paid to local governments to fund public services, such as schools, roads, and libraries.

Title: A legal document that proves ownership of a property.

Title insurance: Insurance that protects the borrower from financial losses due to problems with the title to their home.

PITI (Principal, Interest, Taxes, Insurance): The total monthly housing payment.

Loan Estimate: A document summarizing loan terms and costs.

Deed: A legal document transferring property ownership.

Fixed Monthly Payment: Consistent mortgage payment amount.

Maturity Date: The date when the loan is fully repaid.

Lien: A legal claim on a property to secure debt repayment.

Equity: The portion of your home's value you own.

Depreciation: A decrease in property value over time.

Closing Statement: A document detailing financial transactions at closing.